ECB may lower growth forecast in June
Baku, May 14 (AZERTAC). The European Central Bank is likely to lower its growth forecast for the euro zone in June and could cut interest rates further if necessary, Governing Council member Luc Coene was quoted as saying on Sunday.
The ECB is due to give new staff forecasts in June.
"My guess is that there will not much of a difference compared with March's forecasts - maybe a slight deterioration in growth but nothing dramatic or fundamental," Coene told the Financial Times in an interview published on Sunday.
The central bank's latest survey of professional forecasters last week already pointed to weaker than previously expected growth this year and data due on Tuesday is seen to show that the euro zone slipped back into recession in the first quarter.
Coene, also the head of the Belgian central bank, said he saw no risk to inflation this year, but added that if this changed, the ECB's non-standard measures, such as the 3-year loans, would not stand in the way of an interest rate increase.
Euro zone rates are at a record-low level of 1.0 percent and in addition to cutting rates, the ECB has injected over 1 trillion euros into the financial system with twin 3-year funding operations, or LTROs, in December and February that eased markets' angst in the first quarter about the euro zone.
Coene said the currency bloc's firewalls would be high enough even if the debt crisis took a turn for the worse.
"I think they are sufficient for the moment and I am quite confident that if circumstances showed that more was needed, more would be there," Coene said.
"There is a question of moral hazard, which is why you do not want to put all the firepower upfront," he added.
Greek political leaders on Sunday ignored a final plea from the president to form a coalition government to avert a repeat election, pushing the debt-stricken nation closer to bankruptcy and a possible exit from the euro zone.
Coene said the ECB would not provide emergency liquidity assistance to insolvent Greek banks. "We do not provide ELA to insolvent banks. ... That is one of the principles of the whole ELA policy. It is emergency liquidity assistance - not solvency assistance," he said.
He said further purchases of government bonds by the ECB were "not going to help", because it was up to governments to implement structural reforms to regain investors' trust.
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